AUSTRALIA - The Association of Superannuation Funds of Australia (ASFA) said the removal of the contributions tax would benefit retirees far more than it would cost government.
ASFA said the cost to the government of completely eliminating the contributions tax would equate to around $3.3bn. The cost of a $6 per week tax cut would be approximately the same.
Thus if government were to remove the superannuation contributions tax, it would cost government A$6 per week, while the average Australian wage earner would have up to an additional $30 per week in retirement, said Phillipa Smith, CEO of ASFA.
“If the government removed the 15% super contributions tax in the next Budget, given the additional net contributions, and compound interest, the average wage earner would benefit by around $30 per week in retirement.”
The abolition of the super contributions tax would mean the average wage earner would have up to an additional $610 per year in their super account if the government removed the super contributions tax.
This sum would amount to an additional $29 000 (in today’s dollars) in their total superannuation benefit after 30 years, assuming they received the standard 9% super guarantee.
Smith said government’s good fiscal management placed it in an ideal position to either abolish or greatly reduce the superannuation contributions tax. Improving retirement savings makes sense from an individual and broader economic perspective, said Smith.
“The current Budget situation is markedly different from when the super contributions tax was introduced some 20 years ago under a previous government. The run of surpluses in recent years means the revenue-raising imperative is gone. The priority is now to boost the retirement savings of an ageing population and ensure a viable future economy, ” she said.
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